Make this one simple change
in how you think about your company,
and you’ll multiply your profits in record time!
Dear Business Builder,
A few days ago, I ran an article entitled, “How I Get Rich; How I Make My Clients Richer.” In that issue, I demonstrated how having a grasp of the nuts and bolts side of marketing has helped me make millions throughout my career.
That’s what this issue is all about.
My suggestion: If you’re a business owner, read this issue until you can recite it verbatim. If you’re a marketing pro, print this issue and pass it out to everyone in your company. And if you’re a copywriter, memorize every line.
Heed what I’m about to say, and you’ll all get richer. Ignore these principles and you’ll be putting your professional life in grave danger …
How to kill a great company in one easy lesson
Back in the 1980s, I agreed to help the owner of a small company grow his business. Within three years, it was the largest company in its industry.
By combining five key marketing strategies with kick-butt sales copy, we were attracting between 5,000 and 10,000 new customers every month. By 1988, we had more than 120,000 paying customers. Sales revenues and profits quadrupled.
At that point, my client decided to cash out – take his profits and retire – and asked me to help him sell his company. I created a 20-minute video and a comprehensive “company profile” to help attract prospective buyers.
The buyers – who paid top-dollar – turned out to be a team of three Rhodes Scholars with advanced business degrees from Oxford University.
Within a week after the papers were signed, the crackerjack marketing team we had built was placed under an oppressive bureaucracy: An “Executive Committee” made up of the new owners, their hand-picked CEO, the CFO and the General Manager – none of whom knew one blessed thing about marketing.
Within days, we went from being obsessed with marketing to being infatuated with something called “Corporate Planning.” Key marketers were sidetracked in day-long meetings – and sometimes, week-long out-of-the-office marathons. Scores of crucial sales promotions were put on hold while the marketing staff diddled themselves silly with endless research and reporting tasks.
I, of course, went ballistic. I warned everyone who’d listen (at the top of my lungs) that de-emphasizing marketing was going to drive the company into bankruptcy.
That drew giggles all around.
“You’re overreacting,” said the new owners. “It’s going to be just fine,” chanted the Executive Committee.
It wasn’t fine. Not by a long shot.
The flow of new customers faltered, then plunged. Our active customer file began shrinking. Sales to existing customers plummeted.
Finally, unable to make the new owners see the error of their ways, I fired the client. As I walked out of the office for the last time, I told the CEO, “I understand what being a Rhodes Scholar does for you. You’d have to STUDY to be this stupid.”
I told the CEO that his company would be belly-up within six months. I was wrong. He filed for bankruptcy 90 days later.
Smart Companies put marketing first.
OK, I admit it: I’m a marketing chauvinist. And it’s not because I think we’re necessarily smarter and better looking than everyone else. It’s because the only logical place for marketing is out front – leading the charge for your entire company.
It drives me nuts when executives who know nothing about sales and marketing mindlessly parrot phrases about “putting the customer first” – and then relegate the only people who actually talk to customers to an inferior position in the company.
Before the Rhodes Scholars showed up, my client had put sales and marketing first. And because their job was to respond to customers’ desires and concerns … it meant our customers were #1.
But the Rhodes Scholars and their preening “Executive Committee” wanted to be first – the masters of all they surveyed, at the pinnacle of the corporate pyramid. So, they put sales and marketing in its place – under their thumbs, no more important than janitorial services – or any other department in the company.
And by doing so, they turned my client’s “Smart Company” into a dumb one in one fell swoop.
In a Smart Company,
the marketing department exists
at the top of the corporate pyramid.
Armed with the freshest intelligence on the desires and complaints of prospects and customers, the marketing department directs …
- The development of new products and the production of existing ones …
- The scripting of the sales force or telephone customer service reps …
- The creation of sales promotions and the layout of the catalog and/or store …
- The shipment of products and the delivery of services …
- The management of the customer service department, and…
- Every other activity in the chain of events that begins with contacting a prospect or customer and that culminates with the cha-ching of the cash register.
In Dumb Companies, top execs fail to understand the supreme importance of sales and marketing – or worse: See it as a “necessary evil.”
And their structure shows it. Marketers are kept under tight rein – slaves to multiple layers of bean-counters, bureaucrats and other self-important gasbags who have long forgotten where the money in their paychecks comes from – if they ever knew in the first place.
Even worse: Dumb Companies make sure marketers – the only experts in the company capable of boosting sales, revenues and profits – are frozen into inaction and that crucial sales campaigns are delayed by corporate procedures requiring marketing-challenged morons at the top to approve their every move.
The CEO and top execs spend no more time or effort on sales and marketing than they do monitoring human resources, or any other department. Marketing is beneath them – something the weirdoes down on the fourth floor are responsible for.
In a Smart Company, every employee clearly understands that his/her job exists for one reason and one reason only:
To help marketing sell more, more, more!
- Accounting exists to ensure that sales and marketing have the financial resources it needs to attract maximum numbers of new customers and to boost sales revenues …
- Human Resources exists to ensure that the marketing department has the best talent available and that supporting departments have what they need to help sales and marketing be more successful.
- Information Technology – IT – exists to give the marketing department the daily reports it needs to monitor and analyze the effectiveness of its strategies and tactics.
- The Legal Department exists to help marketers create promotions that are as effective as is humanly possible within established ethical and legal boundaries.
In a Smart Company, the business owner/CEO
occupies not one, but two positions:
- Leading the charge with the Marketing Department – setting goals … monitoring key costs and response rates … helping them innovate new products and sales approaches … breaking logjams … and providing the quick approvals needed to kick winning sales campaigns into overdrive.
- Taking up the rear – constantly driving everyone down the line to make supporting sales and marketing efforts their #1 priority.
BOTTOM LINE: Dumb Companies think that the marketing department exists to sell products.
Smart Companies know that the only reason to have a product is to give the marketing department a vehicle with which it can attract new customers and produce revenues and profits.
- If you own or run a Dumb Company, changing how you and your employees think about your business – the simple act of redefining it as a marketing business and ensuring that your corporate structure and procedures make sales and marketing #1 – is the first step to explosive growth.
- If you’re a marketing exec with a Dumb Company you’re never going to be as successful as your peers at Smart Companies. If you can’t raise the company’s IQ, pack your bags!
- If you’re a marketing consultant or copywriter for a Dumb Company, finding a better class of client will send your income skyrocketing.
How Smart Companies Can TRIPLE Revenues and Profits In 12 Months or Less
This “30 Percent Solution” has helped me
quadruple sales and profits for four companies
and boost sales by up to 4,400% in one year
Once your marketing department is empowered to lead the way, it is empowered to:
- Attract more customers …
- Sell more things to those customers, more often, and …
- Increase the amount of money each customer spends on each purchase.
Do those three, simple things, and you can’t help but grow. Do them well, and your growth can be explosive:
- At Security Rare Coin, these three enhancements produced more than 100,000 new customers; sales jumped from $360,000 to $16 million a month in one year – a 4,400% increase.
- At Blanchard & Company, they also produced well over 100,000 new customers and drove sales to well over $100 million per year.
- At Weiss Research, they more than quadrupled subscriber files, made Safe Money Report the largest $99 investment letter in the world, and helped quadruple profits.
Boosting 5 key metrics by just 30 percent each
instantly TRIPLES sales!
On these and other occasions, I created quantum growth in sales revenues and profits by “keeping it simple” – aiming for a reasonable, easily “doable” 30% boost in each of five key metrics:
- Increasing the number of new customer promotions per year …
- Increasing the size of each new customer acquisition promotion …
- Increasing the response rate to each of these mailings …
- Increasing the number of times each customer orders per year, and …
- Increasing the size of each of those orders.
How much of an increase in revenues will compounding those five, 30% bumps give you? Here’s what it’s doing now for one of my clients…
The best part is, the first two of those little 30% improvements are pretty much slam dunks – things we can do simply and quickly:
More New Customer Acquisition Mailings…
To increase the number of new customer acquisition promotions by 30%, I give my clients a handful of tools and strategies that let them read response and react a couple of weeks sooner on each mailing.
To attract new customers, one client did about six major mailings to rented mailing lists each year. He’d typically wait three weeks after he received his first order from a mailing to see which lists were working for him, then order more names from those lists and a handful of new test lists, prepare any package refinements he wanted to test, then print and mail the next volley.
This process took about eight weeks minimum – sometimes longer – and limited him to an average of six major new customer acquisition mailings per year.
I figured that if we could just cut a couple of weeks off of the time he spent preparing each mailing – mail every six weeks instead of every eight – we could mail as many as nine times per year. That’s a 50% increase that could bring him 50% more new customers each year.
Here’s how we did it …
First, I took his daily response reports for the last twelve months and figured out, on average, what percent of his total return came in on each day of a typical campaign.
I compared how these percentages varied from month to month during the year for several years to allow for seasonal factors. And I studied how they were affected by package format – whether the promotion was a self-mailer or an envelope package, for example.
Then, I had those projectors added to his daily response reports in a way that predict what his final return on investment (ROI) will be for each list and each package test panel mailed.
As you’d expect, these projections are wildly inaccurate in the early days of each mailing. Unexpectedly fast or slow mail delivery in major urban areas make them completely unreliable. But by 14 days after the first order pours in, they prove to be amazingly accurate predictors of his final ROI.
… So now, instead of waiting three weeks to begin planning his next mailing, he can get his next mailing planned two weeks after first response. That alone adds one more new customer acquisition mailing each year.
The next step is to examine every process involved in planning and executing his mailings – shaving a day from the creative process here, and another day from his print and mailing cycle there, until we were confident that we can get him up to 8 mailings per year, beginning immediately.
BIGGER New Customer Promotions …
Like many mailers, my client tests a number of rented mailing lists in each mailing of a hot control. When a list brought him new customers at break-even or better, he’d roll out to a bigger chunk of the list in each successive mailing until he was using the entire file.
Fortunately, my client is an inveterate record keeper. He has data on response rates, average sale and return on investment on every list he’s tested.
It was a fairly simple matter to pick a handful of lists that consistently outperform all others, designate them as “A” lists, and then index them against every other list he’s tested. Then, once we have data on how well a package/”A” list combination work, we can use that index number to predict how well every other list he’s ever tested will respond to his new promotion package, and roll-out big time.
Result: He’s able to roll much bigger with his “known” lists almost immediately, adding millions of names to his new customer acquisition mailings each year.
Plus, we found a way to broaden our mailing universe simply by getting list brokers to work harder for us.
My client had pretty much been “faithful” to a single mailing list broker for years. We instituted agreements with multiple brokers, promising each an exclusive on each new list they bring us.
Each of these ideas becomes a list test, entered on the mail plan using a projector that reflects how similar lists have performed with the promotion we’re using.
How to get a 30% lift in response
This one’s a little trickier. But it’s not un-doable. I routinely see new promotion packages – and even headline, premium, offer and other tests on control packages – bump response 20% to 30% and even more. Sometimes, much more.
Let’s say you’re getting a 1% response rate. That means 10 people in 1,000 are saying “yes” to your offer. All you need to do is find three more buyers per 1,000 pieces mailed.
Piece of cake. The key here is to test aggressively in each and every mailing, without allowing our tests to slow the process.
For this new client’s first roll-out of a hot new control package – for example, I tested two new headlines and four offer variations. Next time, I’ll be testing our best headline/copy/offer combination in two, maybe three cheaper formats.
Bumping this client’s response by 30% is eminently doable. Heck. My first promotion for him just beat his control by 300% – ten times more than our conservative 30% target.
“If you make money on a customer acquisition mailing,
A few years back, a client hired a new marketing director and told her that she would be reporting to The Redhead and me! In my first meeting with the new employee, the business owner stuck his head into the room and told her, “Just do whatever Clayton and Wendy say. You report to them.” – and then vanished.
It was a joke, of course, and I told her so. Everyone in that company reports to the owner. I was just an outside guy. A consultant. But I did have a few pointers to help her.
I told her, “Your Prime Objective is to produce as many new customers as possible every month.
“Your goal is to do this at break-even. For every dollar we put into the mail, we want one dollar back – AND a new customer.
“If you make a profit in a promotion designed to attract new customers – if you get $2.00, $1.50 or $1.01 for each dollar you spend – that’s a bad thing. It means you didn’t mail enough promotion pieces or bring in as many new customers that month as you could have.
“And that means our sales to existing customers – the engine that drives this company’s profits – will be less than they could have been for years to come.”
I showed her how each new customer stayed with us for an average of seven years and made subsequent purchases that generated $500 in net profits every year.
That meant each new customer was worth $3,500 to us – and every new customer we didn’t get would cost us $3,500 in profits down the road.
“So,” I said, “as far as your boss is concerned, losing money on a promotion now and then is forgivable. It just means you’re trying. Consistently breaking even will make you a hero. But consistently making profits on new customer acquisition promotions will probably get you fired.”
Right then and there, we established an aggressive new customer acquisition strategy designed to break even on each promotion …
We test each new promotion package against the existing control in a special panel consisting of an nth-name selection (a geographically balanced portion) of each of our “A” lists.
If the new package wins – if it produces a higher return on investment (ROI) than the control, we: 1) Look at how every other list in our universe has historically performed against those “A” lists and 2) Use the new package’s return on investment with our “A” lists to project what our ROI would be if we mailed each “B” list in our universe.
Then each month, we construct a mail plan that:
|New Customer Acquisition Mailings Per Year||
|Average Mailing Size||
|Total Customer Acquisition Pieces Mailed:||
|New Customers Per Year||
|New Customers Making 2nd Purchase First 60 Days On-File||
|Average Net Sale (Gross minus product costs)||
|60-Day New Customer Net Sales||
|Additional 12-Month Purchases Per New Customer||
|Average Net Sale (Gross minus product costs)||
|Additional 12-Month Revenues From New Customers||
After employing this “30 percent solution” for just 12 months, my client will have generated more than twice as many new customers … his sales to those new customers in their first 60 days with him will jump 281% to more than $1.7 million … PLUS, he’ll sell another $105-million-and-change to them in their first year with him – a 291% increase.
- Includes roll-outs to every “A” list in our universe – the lists we know we can mail at break-even or better …
- Add significant test panels of every “B” list that our history indicates will perform at break-even or better – but not as well as our “A” lists…
- Add as many test panels as possible of “B” lists that we expect to produce a slight loss – and “C” lists (previously untested lists projected to produce a 50% ROI) until our mail plan projects a total return on investment of 100%.
Result: For every dollar we mail, we get one dollar back – and a new customer.
Over the next three years, we quadrupled the number of paying customers on our file – and because we broke even on our average new customer promotion, each one of them cost us $0.
At the end of 36 months, those customers were handing us more than $80 million in sales and tens of millions in net profit each year.
When you want to grow really, REALLY fast…
At Blanchard & Company, I set out to lose money on every new customer I generated.
Crazy, right? Yeah: Crazy like a fox!
First, I did my homework. I studied our active customer file. I determined that each new customer made an average of five purchases per year … that the average purchase was $1,500 … and that the net profit on each of those purchases was about $500.
Furthermore, I discovered that the average new customer made one additional purchase in his first 60 days with us, producing a $500 profit. And I figured out that if I could spend just $200 of that to “buy” new customers, I could bring in two or three times more new customers each year.
I didn’t tell the owner that I was planning to “lose money” on each new customer. I told him, “I just want an extra 60 days to break even on each new customer. I just want to change the bookkeeping entry a bit – add the profit from second purchases in customers’ first 60 days to the revenues generated by my new customer acquisition mailings.”
I showed him how our Prime Directive had been to mail our new customer acquisition promotions to as many prospects as possible while breaking even. But the problem was, some of the biggest prospect files out there just wouldn’t come in at 100% of cost no matter what we did.
I showed him how that meant we were leaving thousands of new customers – and millions of dollars in future profits – on the table. And I demonstrated how, if we could just mail down to, say, 85% to 90% of cost, we could add millions more names per year to our mail plans and tens of thousands of new, paying customers to our house file.
So I suggested the client consider “cooking the books” a little bit. Instead of insisting that his new customer acquisition mailings break even ($1 in for every $1 they cost), I suggested that when we find huge files that we can’t get to break even, we allocate part or all of that first 60 days income to the new customer promotion.
It worked like gangbusters. The company, which had been running a distant third in its industry, rocketed to #1 within a year.
In fact, this strategy has worked so well for me over the years, I’m doing the same thing for a new client right now!
Consider these numbers:
Right now, my client’s new customer acquisition mailings cost him $560/M (list rental, postage, printing and lettershop): $56,000 to mail 100,000 pieces.
At break-even, that 100,000-piece mailing generates 1,000 new customers and $56,000 (gross revenue minus product cost). He gets one dollar back for every dollar he mailed. At an ROI of 90%, he loses 10% of his mailing investment, or $5,600.
We know that 8% of his new customers make a second purchase netting a profit of about $100 in their first two months on board. So those 1,000 new customers will make 80 purchases, netting my client an $8,000 profit in their first 60 days with him.
Now, I’ve found a few huge mailing lists that we’ve never been able to mail at break-even. There are millions of potential customers on those files, but when we test them, we only get 90% of our money back.
So, if a simple bookkeeping entry – allocating a portion of each new customer’s first 60 days of profits – would open these otherwise impenetrable lists to us – why not do it?
Even at .8% response, he’ll pick up 8,000 new customers for every million pieces mailed. So he has to wait 60 days to begin making money with them. So what?
We know that in the ten months after those first 60 days, his average customer will make four additional purchases netting $100 each. For every 8,000 new customers, that’s $3.2 million in additional profit this year.
Furthermore, we know that the average new customer will continue making five purchases per year for seven years. That means these 8,000 new customers will hand us $28 million in net profit in their lifetimes.
And we’re not going to mail these marginal lists just once – we’re going to mail them over and over again – generating thousands of new customers each time our control projects a 90% ROI on them. For every one million names we mail three times a year, we add 24,000 new customers – and $84 million in future profits!
Seems silly to let a bookkeeping entry stand between you and that kind of money – right?
Time to start optimizing lifetime value…
Now that we’ve got my client doing bigger new customer promotions, more often, it’s time to kick things up another notch – by bumping the number of times each customer orders, and how much he spends with us each time.
Until now, my client did what many direct response marketers do: He simply mailed a couple of promotions to his entire customer file each month. I call that “vertical” marketing. No matter who you are, no matter what kind of product you’ve purchased in the past, you get the same offers as everyone else on his file.
Not a terrible approach, but we can do better by combining vertical and horizontal marketing techniques.
Horizontal marketing treats each group of customers on your house file in ways that ensure optimum response and maximum order size. Horizontal marketing asks …
- “What kind of product has this customer demonstrated a desire for before?” and then offers him an add-on that addresses the same desire or concern.
- And, “Where is the customer in his life cycle with us?” – and then sends him promotions that are compatible.
- And, “What’s going on in my customer’s personal life?” – and then sends him promotions that are compatible.
So in addition to vertical promotions sent to the entire file – my client’s customers receive horizontal promotions:
- A 60-day campaign for a President’s Circle promotion designed to make a quick second sale to our new customers in their first two months with us…
- Upgrade mailings to buyers whose selection of products has demonstrated a particular desire or concern, offering a new add-on product that addresses that same issue…
- Personalized “renewal,” “re-order” and “we-want-you-back” promotions at the appropriate times…
- Special discounted offers on the customer’s birthday, anniversary and other special times of the year.
Plus, for our vertical marketing, the entire file also gets two major mailings each month: One focusing on one of our hottest products, and another kind-of catalog mailing that invites customers to try anything in our product line at preferred prices.
Will this kind of comprehensive strategy – along with harder-hitting sales copy – give us the 30% bump in response, average sales, profits and customer lifetime value we’re looking for? There’s not a doubt in my mind.
The final step
Once you’re generating thousands more new customers and thousands more dollars in profits from sales to those customers, it’s time to turn an eye to minimizing costs.
I put this step last for several reasons. For one, each of my clients has an accountant or CFO – someone whose job it is to monitor spending and overhead. For another, most marketing people are constantly looking for ways to get it done faster and cheaper. And for yet another, cutting costs can only get you so far.
As we’ve seen, a sharp marketing strategy and expert execution can quadruple profits. Cutting costs may save you 5% here or 10% there. Nevertheless, every penny you save on unnecessary expenses goes straight to the bottom line. And over time, those pennies add up to real impressive dollars.
Most of my clients offer premiums – free gifts – to attract new customers. And most of those premiums tend to be special reports, which are included in the “Welcome Kit” new subscribers or first-time buyers receive.
A few years ago, for example, one client’s Welcome Kit cost him $15 to deliver. Today, he delivers most of them online – and the $15 per new subscriber he saved is pure profit.
Adding a web-based marketing initiative can cut cost per sale by an order of magnitude. Mailing a sales promotion to your house file can cost anywhere from $400 to $800 per thousand pieces mailed, for example. Sending the same promotion via e-mail costs next to nothing.
You could blast the promotion to your customers every day for a week or even a month – with a slightly different headline and opening copy each time – and actually generate greater sales volume at a fraction of the cost.
Sometimes spending more saves you a bundle. For high-ticket products, for example, I’ve found that personalized sales letters mailed to customers via First-Class Mail often generate a lower cost per sale than mailing a non-personalized promo via the cheaper Third -Class bulk mail.
When I’ve tested this, the personal touch and the perceived urgency of personalized letters mailed First-Class usually boosted response tremendously, thereby lowering our cost per sale.
With self-mailers especially, slightly altering format – like adjusting your trim size one-eighth or one-quarter inch, for example – can save a bundle on your printing bills. And although it’s not always possible to do, ganging jobs – combining several similar printing projects into one large job – can shave big bucks too.
I strongly endorse programs in which employees are rewarded for suggesting ways the company can save money.
Worth thinking about…
What could you do right now – today – to …
- Increase the number of new customer acquisition promotions you field each year?
- Ramp up the size of each of those promotions?
- Increase the number of prospects who say, “YES!” to each of those promotions?
- Boost – even incrementally – the number of additional times each customer orders per year?
- Pump up the size of each of those orders?
- Cut marketing and fulfillment costs without adversely affecting the number of new customers you generate or sales volume to existing customers?
How could focusing on these five key numbers help you, your employees and your marketing people triple YOUR revenues and profits?
How could you tie employee compensation (raises, bonuses, stock options, etc.) to how well key employees meet your goals in improving each one?
Answer these questions and you’ll be well on your way to at least tripling your sales and profits!
Yours for Bigger Winners, More Often,
Publisher & Editor
THE TOTAL PACKAGE
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